Housing boom 'a thing of the past' as house prices fall for the fourth month in a row

House prices are still falling sharply across the country, Britain's biggest building society warned today.

Since October, the average price of a home has now plunged nearly £6,700, equal to about £55 a day.

The Nationwide said prices dropped a further 0.5 per cent in February, the fourth consecutive month that prices were in negative territory, leaving the housing boom a distant memory.

And there was further concern for homeowners as figures showed the number of mortgages approved remained well down on last year's level.

A total of 74,000 new mortgages were approved for house purchase during the month, up from 72,000 in December, according to the Bank of England.

But the figure was still the second lowest since September 1995, and more than a third lower than the 121,000 mortgages for home movers arranged in January 2007.

The average cost of a home is now £179,358, and experts warned yesterday that prices will keep on falling.

Top economists have been warning of price falls as steep as five per cent this year, and next year too.

This would mean a home bought today will be worth about £18,000 less by the end of 2009.

The falls will be a devastating blow for people who bought homes recently, but are now seeing the value go down by the day.

For homeowners who took out 100 per cent mortgages, this means they will already be in negative equity.

This is when the value of somebody's home is smaller than the size of their mortgage.

And experts warn that price falls could be even more dramatic, particularly if unemployment starts rising.

At present, few people are being forced to sell their homes because they can no longer afford the mortgage repayments.

But, if they lose their jobs, many will have to sell - and will probably have to accept a much lower asking price to attract a buyer.

Howard Archer, chief UK economist at Global Insight, said: "There is clearly a very real danger that a sharper housing market correction could occur.

"A growing risk is that the economy suffers recession, or even extended weak growth, and unemployment rises significantly.'

The annual rate of house price inflation has now fallen to just 2.7 per cent, its lowest level since November 2005.

If it keeps on falling, it will lead to a dramatic change - prices on the high-street, currently rising 2.2 per cent, will be going up faster than house prices.

This will be a double agony for homeowners, forking out more money for their shopping and "making" less money from their home.

Fionnuala Earley, Nationwide's chief economist, warned: "It seems clear that we will not see recent rates of growth in either the UK economy or housing market repeated for some time.

"There is currently an unprecedented amount of uncertainty about future economic conditions."

To add to homeowners' concerns, she ruled out the chance of the Bank of England making "aggressive" interest rates cuts.

She said the Bank's concerns about rising inflation, currently above the Government's two per cent target, will stop them making big cuts.

The decision by the Bank's monetary policy committee, whose main duty is to control inflation, will be announced on Thursday at noon.